New Delhi, August 23: The Delhi High Court pressed restaurant associations to explain why customers are being asked to pay both inflated menu prices and additional service charges, questioning the practice as unfair to consumers.
A division Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela posed the query while hearing appeals filed by the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurant Associations of India (FHRAI). The two bodies have challenged a single judge’s March order that barred restaurants from levying mandatory service charges, calling the practice “camouflaged, coercive and against public interest.”
The Bench used the example of bottled water to press its point, asking counsel why a Rs 20 product was being listed for Rs 100 on menus, and why customers must still pay a separate service charge.
“You are charging more than the MRP, for the experience of dining at your restaurant,” the judges said. “And you are also levying service charges for the services rendered. If ambience is part of the experience, does that not include the service you are providing? What is this additional charge for?”
The court further remarked, “When you quote Rs 100 for a Rs 20 water bottle, without clarifying that the extra Rs 80 is for ambience, how is the consumer expected to know? Providing ambience itself forms part of your services. Can you charge any amount over and above the MRP? And for service you are charging, what’s that Rs 80 for?”
The single judge’s order of March 28 had termed mandatory service charges a “double whammy” for consumers, noting that they were forced to pay Goods and Services Tax (GST) on top of the service fee. The court had observed that service charges were being “arbitrarily collected and coercively enforced,” adding that it could not remain a “mute spectator” in such cases.
On Friday, the division Bench echoed similar concerns, questioning the justification behind restaurants charging customers under three heads — cost of food, ambience, and service — and then levying an additional service charge.
The matter remains pending as the Bench continues hearing arguments from both sides.
